You are correct sir. I own $10,00 in stock. per reg T, I can borrow $5,000 against it. Now the stock goes on an Apple/Amazon like tear and it's worth $1,000,000. Now I can borrow up to $500,000 against it--that's a lot of rent groceries.
The above assumes you control the shares and they are pledgeable as collateral. It is not easy, but doable, to borrow against RSU's. i.e. you probably need a high net worth/private banker relationship.
I was under the impression that per reg T, you can borrow 100% of the equity value of your stock. So if you own $10,000 worth of stock, you can borrow $10,000 against it (but you will get margin called if there's a decline, so don't do that).
You're right however, if you want to acquire more shares using margin, then your equity needs to be at least 50% of the stock value, i.e. with $10k you can purchase (up to) $20k worth of stock.
You can't put $10K into the account, buy $10K in shares, and borrow $10K in cash (leaving 0 net equity in the account).
Your scenario where you can borrow 100% of the value applies only if you apply that 100% to further shares (meaning you buy 2x as many shares and have a margin balance of 100% of your original equity but 50% of the shares' value).
That means you can buy $20K worth of stock using $10K of cash.
Interesting. I don't usually use margin since I live in a country without capital gains tax, but if I transfer $10k worth of shares and I want to use it as a line of credit, then I can at most take out $5k (in cash) before getting margin called?
Yes and no (mostly yes). The 50% level is the "initial margin" limit (hence the "yes" part) for initiating a loan.
There is a separate, lower limit called the "maintenance margin" limit, which is the equity percentage that you need to hold to avoid a margin call on a held position.
So, if you deposit $10K in shares, they appreciate to $12K, you borrow $6K and then the share price falls back to the original amount, you have $10K in shares, $4K in net equity (40%), but are probably not going to receive a margin call.
Or, if they are worth $10K, you borrow the limit of $5K and the share price falls by 1%, you won't get a margin call there either (on most securities).
The above assumes you control the shares and they are pledgeable as collateral. It is not easy, but doable, to borrow against RSU's. i.e. you probably need a high net worth/private banker relationship.